rethink sustainability
Waking the dead
In the late 19th century, Chile boasted a 220-mile stretch of coastline covered in bird droppings to a depth of five feet.1 It was not an accident, instead the world was reluctantly reliant on the nitrogen-rich hoard of avian waste to fertilise crops.
Enter Fritz Haber - a man with an obscure mission - to relieve the world of its dependence on bird droppings. In 1909, the German chemist succeeded in reliably synthesising ammonia, capturing nitrogen in a liquid form, which could then be applied to crops. Fellow chemist Carl Bosch then got the system to work on an industrial scale and the Haber-Bosch process was born. Without the process and the additional food production it enabled, the expansion of the world's population from 1.6 billion in 1900 to 7.7 billion today could arguably not have happened.
But while the new system enabled an explosion of human life on land, the story was quite different undersea.
In the dead zone
A dead zone is an area of water in which low oxygen levels threaten the ability of life to survive, which can eventually lead to mass extinctions. While dead zones can and do occur naturally, since the 1950s scientists have observed a quadrupling of the number globally. In coastal waters, we know of over 500 dead zones—a tenfold increase2.
Aside from the environmental devastation, dead zones can have a severe effect on coastal economies, particularly those of developing nations, which are most likely to rely on the ocean for food and jobs. Usually, when nets come back empty, fishing boats simply try their luck elsewhere. But when a dead zone spans over 8,000 square miles—about the size of New Jersey—as it does in the Gulf of Mexico, the cost of searching for a catch quickly eats into your profits3.
It is solving this problem that is one of the great sustainability issues of our time with investors having an essential role to play in incentivising the solutions we need.
Cause of death
In the open ocean, the primary cause of dead zones is climate change: warmer water holds less oxygen. Thus, solving the problem outside of coastal waters depends indirectly on our efforts to reduce greenhouse gas emissions.
Meanwhile, the direct and primary cause of coastal dead zones is nitrogen fertiliser like that produced by the Haber-Bosch process. Excess fertiliser often makes its way via rivers into the oceans around tributaries, where it feeds cyanobacteria algae.
The cyanobacteria then accumulate, die and, as they decompose, consume the oxygen in the surrounding water to create a dead zone. Ironic, considering the effect the innovation had on human life.
The problem is getting worse. In the last couple of decades, the aggressive targets set by nations such as the United States for the production of ethanol biofuel—upon which the Trump administration has doubled down4 -have incentivised farmers to grow more of the corn from which it is derived. Unfortunately, corn is especially problematic when it comes to nitrogen run-off. It has shallow roots compared to many other crops, and can only absorb nitrogen for around 60 days a year. Additionally, the greenhouse gasses emitted by the fertiliser needed to create biofuel may be comparable to those emitted by burning an equivalent amount of oil.5
What can investors do?
With the demand for biofuel here to stay, investors can help sidestep the issue by supporting next-gen biofuels. For instance, the New Hampshire-based Mascoma Corporation is working on industrialising a process for cellulosic ethanol production, which is derived from wood or woody grasses that need far less fertiliser than corn.
More generally, responsible investors can incentivise agricultural businesses to use fertiliser more sustainably - growing crops using less fertiliser and carefully managing how it is used.
Animal agriculture is also a direct source of nitrogen pollution in the form of the manure. This natural fertiliser can make its way into waterways if it isn't responsibly managed,6 and investors have the power to help create more accountability for meat companies.
The main contribution of animal agriculture is in creating massive demand for animal feed, which is grown using fertiliser. Of course, animals will always need to eat but we might not always need to eat animals. Cultured meat—real meat grown sustainably from stem cells without the animal—offers a clear path toward a world with far less factory farming. Investing in “clean" meat companies, such as Memphis Meats, can only help bring such a world to life sooner.
Investing in resurrection
In 1991, the largest dead zone in the world was located in the Black Sea[7]. By 2001, though, it had all but disappeared. Following the collapse of the Soviet Union, fertilisers simply became too expensive to use in the area.
Just a decade later, the dead zones had re-oxygenated, and fishing became a significant part of the regional economy once more. While the resuscitation of the Black Sea dead zone was unintentional, it serves as a powerful demonstration of the ocean's capacity to recover—if given a chance.
In focusing on businesses committed to responsible farming and supporting innovations that reduce fertiliser use, investors can help bring dead zones back to life. Acting early doesn't just offer significant investment opportunities. It also represents a shorter path to recovery for our oceans.
1 ScienceHeroes.com (n.d.) 'Fritz Haber'. Available here
2 Breitburg et al. (2018) 'Declining oxygen in the global ocean and coastal waters', Science, vol. 359, no. 6371. Available here
3 Rabalais, N. (2017) 'The “dead zone" of the Gulf of Mexico'. Available here
4 Tabuchi, H. (2017) 'Score One for Corn: In Battle Over Biofuel, a Rare Setback for Big Oil'. Available here
5 Simpson, S. (2009) 'Nitrogen Fertilizer: Agricultural Breakthrough—and Environmental Bane'. Available here
6 Garling, G. (2015) 'What's the role of factory farming in ocean degradation?'. Available here
7 Mee, L. (2006) 'Reviving Dead Zones'. Available here
Important information
This document is issued by Bank Lombard Odier & Co Ltd or an entity of the Group (hereinafter “Lombard Odier”). It is not intended for distribution, publication, or use in any jurisdiction where such distribution, publication, or use would be unlawful, nor is it aimed at any person or entity to whom it would be unlawful to address such a document. This document was not prepared by the Financial Research Department of Lombard Odier.
Read more.
share.